1. society
2. work
3. unemployment

The Internet –
the new helping the old
Brian Williamson
CCIA & EDiMA, Brussels
March 2015
Plum Consulting, London | [email protected] | www.plumconsulting.co.uk
Growth is a recent phenomenon
Innovation necessary but not sufficient for growth
“Productivity isn’t everything, but in the long run
it is almost everything” Paul Krugman
Labour productivity and employment, Western Europe
GDP and hours worked per person, Western Europe
Labour productivity (GDP per hour worked)
GDP per person (1990 USD)
Employment (% of population)
Annual hours worked per person employed
$30
$25
$20
$15
$10
$5
$0
1850
1875
1900
Source: Plum Consulting, OECD
1925
1950
1975
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2000
* Weighted average of 12 West European countries
$50,000
$40,000
$30,000
$20,000
$10,000
$0
1850
1875
Source: Plum Consulting, OECD
1900
1925
1950
1975
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2000
* Weighted average of 12 West European countries
"Thou aimest high, Master Lee. Consider thou what the invention could do to my poor
subjects. It would assuredly bring to them ruin by depriving them of employment, thus
making them beggars" Elizabeth I, 1589, refusing a patent for the knitting machine
© Plum 2015
2
The Internet – the General Purpose Technology (GPT)
GPT contribution to labour productivity growth
% per year
1.6%
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
Steam
Electricity
ICT
1760 1780 1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000
Alan Greenspan, March 2000
 “…until the mid-1990s, the billions of
dollars that businesses had poured into
information technology seemed to leave
little imprint on the overall economy….”
 “The full value of computing power could
be realised only after ways had been
devised to link computers into largescale networks…”
Source: Plum Consulting, Crafts (2011)
© Plum 2015
3
Steam complemented sail from around 1850
1838: SS Great Western – first
purpose-built transatlantic
steamship
1902: Thomas W. Lawson Sailing ship with steam & electric
winches - coal & oil freighter
New may complement the old, even though it may eventually substitute for it
© Plum 2015
4
Convergence, then divergence in internet age
Labour productivity growth
EU-15
3.0%
US
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
1980-1995
1992-2004
2004-2013
Source: Plum Consulting, ITIF
© Plum 2015
5
Internet use dominates benefits
ICT contribution to productivity growth, EU15
ICT contribution to productivity growth, US
Percentage points per annum (smoothed data)
Percentage points per annum (smoothed data)
ICT producing - manufacturing
Communications and computer services
ICT using - services
ICT producing - manufacturing
Communications and computer services
ICT using - services
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1980
1985
Source: Plum Consulting, KLEMS
© Plum 2015
1990
1995
2000
2005
1980
1985
1990
1995
2000
2005
Source: Plum Consulting, KLEMS
6
Europe invests more than US, but not in ICT
Investment as a % of GDP
25%
Other investment as % of GDP
ICT assets as % of GDP
20%
15%
10%
5%
0%
EU
2000
US
EU
2011
US
Source: Plum Consulting, ITIF
© Plum 2015
7
Substantial variation across Europe
ICT-driven productivity growth
Average 1997-2007
ICT producing - manufacturing
Communications and computer services
ICT using - services
Percentage points
3
2.5
2
1.5
1
0.5
Latvia
Estonia
Ireland
Poland
Czech Rep.
Finland
Slovakia
Lituania
Sweden
Hungary
UK
Slovenia
Netherlands
Luxembourg
Portugal
Greece
France
Denmark
Belgium
Germany
Austria
Spain
Italy
0
Source: Plum Consulting, KLEMS
© Plum 2015
8
You don’t need to make IT to use IT
ICT share of output vs. productivity contribution
Productivity contribution from ICT use
(percentage points per annum)
1997-2007
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
Australia
USA
Sweden
Finland
Japan
Hungary
Netherlands
Germany
Italy
Ireland
Slovenia
0%
2%
4%
6%
8%
10%
ICT output share of GDP
Source: Plum Consulting, Oulton (2010)
© Plum 2015
9
Sandvik – the ‘servification’ of industry
 Sandvik (Swedish)
・Mine automation
- Vehicles equipped with wireless
communication & navigation systems
- Automated or operated remotely
・Proactive maintenance
- Real time monitoring
- Equipment fixed before it breaks
・Logistics enhancement & productivity
© Plum 2015
10
Neuroathome – remote rehabilitation
 Uses Microsoft Kinect to rehabilitate
patients with neurological injuries &
disorders e.g. Parkinson's
 Allows clinicians to prescribe physical and
cognitive exercises to patients at home,
and to monitor patients remotely
 Better health outcomes at lower cost
© Plum 2015
11
Cuckoo clocks – reaching global customers
 The internet helps businesses reach new
markets
 German wood sculptor Gerhard Schmeider
takes orders for his cuckoo clocks from the
Far East, Australia and the USA.
 Gerhard’s business relies on the internet to
survive since the local market is too small.
© Plum 2015
12
The internet continues to extend its reach
Mobile
New
verticals,
new
business
models
Innovation
&
diffusion
AI
© Plum 2015
Apps
Things
Wearables
13
Benefits of internet are not assured
Divergence with internet
Policy matters
Long history of efforts to block innovation
 Gutenberg’s printing press by the sultans of
the Ottoman Empire from 1485
ICT contribution to growth
1990-1995
 Steam railways by Austro-Hungarian
emperor Francis I
1995-2000
Number of countries
6
5
Comes at a cost, arguably even higher now
4
3
 “…it takes all the running you can do, to
keep in the same place” The Red Queen in
Through the Looking-Glass
2
1
0
0
0.2
0.4
0.6
ICT contribution to growth
Source: Plum Consulting, Vu (2005)
0.8
1
 “The opportunity cost of security and
preservation of the status quo …has risen
greatly in recent times”
James Heckman
A new game requires new rules
© Plum 2015
14